During Normal Times, If the Marginal Propensity to Consumer Is

question 12

Multiple Choice

During normal times, if the marginal propensity to consumer is 3/4, and the government borrows $10 billion in order to increase spending by that amount, real output will expand by

• A) more than $40 billion, because both the additional borrowing and the additional spending will stimulate real output.
• B) $40 billion, because the net multiplier will be 4.
• C) less than $40 billion, because the additional borrowing will place upward pressure on real interest rates, weakening the impact of the multiplier.
• D) $10 billion, because during normal times, the government can borrow funds without any increase in interest rates.

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Definitions:

Archaea

Prokaryotic organisms that are members of the domain Archaea.

Endospores

Durable, non-reproductive structures formed within some bacteria, enabling them to survive extreme conditions.

Unfavorable Conditions

Environmental situations or contexts that pose challenges or threats to the survival and thriving of organisms.

Antibiotics

Antibiotics are drugs that combat bacterial infections by killing or inhibiting the growth of bacteria, crucial in modern medicine for treating various infections.